SUB-BRANCHES OF LIFE INSURANCE COMPANIES IN SINGAPORE (Number closed down and action taken to protect policy-holders)

Mr Ong Chang Sam asked the Minister for Finance how many sub-branches of life insurance companies in Singapore whose head offices are in the Federation of Malaya have closed down, or have been closed down, from 1st December, 1961, to the latest convenient date; and what action he has taken or proposes to take to protect the policyholders insured by these sub-branches.

Dr Goh Keng Swee: Mr Speaker, Sir, the following Federation life insurance companies have registered branches in Singapore. I give both the names of the companies and the date of registration: Companies Date of Registration Ban Chuan Pek Leng Co., Ltd 3-10-59 Billian Inusurance Co., Ltd 31-11-61 Fair Inusrance Co,. Ltd 11-9-61 Golden Wall Inusrance Co,. Ltd 18-9-61 Hup Cheong Inusrance Co., Ltd 16-8-61 Mah Peng Insurance Co., Ltd 6-5-61 Merdeka Inusrance Co., Ltd 23-6-61 Metro Enterprise Co., Ltd 10-10-61 Nothern Malaya Insurance Co,. Ltd 10-10-61 Peng Min Insurance Co., Ltd 18-9-59 Peh Sin Assurance Co., Ltd 4-8-61 Sinmah Insurance Co., Ltd 15-6-61

From this list, Members will note that nearly all these branches have commenced business in Singapore in the latter half of last year, in addition, the following insurance companies have recently been incorporated in Singapore although they have also been doing business in the Federation. These companies with headquarters in Singapore are: Companies Date of Incorporation Champion Assurance Co., Ltd. 9-10-61 Malayan National Life Insurance Co., Ltd. 21-09-61 Tong Ah Assurance Co., Ltd. 20-09-61

In addition, there may be other unregistered branches of companies doing business here. The Police are on the trail of some of these with a view to prosecution.

As regards the general problem, the Singapore Government has been for some time in close touch with the Federation Government with a view to introducing adequate control over insurance companies. Legislation has already been passed in the Federation which empowers the Government to close down insurance companies which conduct their business in an improper way. Further legislation is in hand to empower the Government to wind up these companies and distribute their assets to policyholders. I understand that such legislation will shortly be introduced in the Federation Parliament on a Certificate of Urgency. The Singapore Government intends to take similar action here, combining the two pieces of legislation into one. I have been assured that in the distribution of the assests of these companies to policy-holders, there will be no discrimination between policy-holders in Singapore and those in the Federation whether the company is incorporated in one territory or the other. I am informed, however, that the mismanagement of several of these companies has been so bad that it is unlikely that policy-holders will get more than a portion of the money they have put in. Fortunately, however, most of these companies have only recently commenced business before the Federation Government took action to deal with them. The probable loss of money which policy-holders may suffer has therefore been limited by the prompt action taken by the Federation Government. These insurance com panics receive payments of small sums of money, usually between $3 and $12 per month per policy-holder. A $3 monthly contribution would entitle the policy-holder to a sum of $400 on death or in ten years' time.

Since most of the companies were incorporated in the Federation, the initiative in taking action to wind up these companies rests with the Federation Government. As I mentioned before, policy-holders in Singapore will be treated on the same basis as policy-holders in the Federation.

In the near future, the two Governments intend to introduce full and comprehensive legislation over the insurance business and there will be appointed a Commissioner of Insurance which will take charge of a pan-Malayan department with authority to enforce the law in both territories. The present set of insurance laws which the two Governments are proposing is only the first step in the control of the insurance business. It is intended specifically to combat the mushroom insurance companies which had been springing up in recent months.

Mr Ong Chang Sam (Choa Chu Kang): (In Mandarin): Mr Speaker, Sir, I an very glad to know that the Minister for Finance has declared to this I louse that in the near future the Government will be introducing legislation to protect the policy-holders. But as far as I know, at the present moment, there are many insurance company agents who have wound up their business. I want to ask the Minister for Finance whether at the present moment legal action can he taken against these agents to recover the money paid by the policy-holders.

Dr Goh Keng Swee: Mr Speaker, Sir, I did say in my answer to the question that the police are on the trail of some of these companies - those who have not complied with the law as regards registration of companies and the deposit of a sum of money with the Attorney-General. Of course, when the Ordinance is passed here, we can un a sep further and wind up these companies and distribute whatever assets remain to policy-holders.

Mr A. P. Rajah (Farrer Park): Under our insurance laws, before an insurance company can do business, certain sums of money have to be deposited. Could the Minister assure the House that these branches of Federation companies which are carrying on or had been carrying on business here have had those sums deposited under the law?

Dr Goh Keng Swee: If these companies have deposited monies with the Federation Government, they are not required to make a similar deposit in Singapore. But where they have not, then they must do so. But the trouble with these companies is not that they do not make these deposits of money. Several of them have deposited these sums of money and they are still in serious trouble. The reason is that they do not conduct insurance business in the proper actuarial way. Let me give some examples. When you lake out a policy, you need not take cut one on year own life. You can take out a policy on somebody else's life. Quite often, the policy-holder will say, "This man may croak very soon." So he takes out a policy on this man, and if the man dies after nine months, he gets the capital sum. There is no proper medical examination which reputable insurance companies carry out as a matter of course. The whole system under which these so-called insurance companies work is rather similar to the Chinese benevolent societies whereby you set aside certain small sums of money -

Mr Rajah: Mutual aid.

Dr Goh Keng Swee: Yes, and then you get certain benefits in the event of death either of yourself or of certain persons that you can nominate. But whereas mutual aid societies are run on a non-profit making basis by people who get together, it is suspected that many of these companies are nothing more than downright swindles. In fact, the accounts f same of these companies have been examined by the Federation Government end they show a most intolerable state of affairs. Fortunately they do not appear to have sold very expensive policies; also most of them have not been operating for a very long time. So although damage has been done, the damage is somewhat restricted.

Mr David Marshall: Has the Minister considered some means of advising the better intentioned of these companies who are seeking to meet the needs of the poor for insurance, in order to assist them to a stable financial policy?

Dr Goh Keng Swee: It is very difficult for me to meet the point raised by the Member for Anson, because the full facts of this whole business are not known. Only a number of cases have been brought to light, either by complaints raised by policy-holders who want ta claim their capital assured and have not been able to do so, or complaints by agents, and preliminary examinations into the accounts of a few of these. If there are genuine honest companies which attempt to meet a social need and are run in a proper way, then I think when we come across such eases we shall see what can be done. But my view is that the manner in which all those businesses have been conducted shows, firstly, that there has been an inadequate understanding of the actual principles on which any insurance business should be run, and secondly, the financiers behind some of these businesses are persons of doubtful repute. That, is the thing that has been troubling the people.

Mr Ong Chang Sam: (In Mandarin): if the policy-holders are not able to trace the insurance agents, will the Minister for Finance find it necessary to set up a commission to ensure that complaints can be received from such policy-holders as to the amount they have paid up, and as to how they can recover their paid-up money?

Dr Goh Keng Swee: As far as the policy-holders of the companies are concerned, and as far as these policy-holders go, I think the only remedy is for the companies to be liquidated and for the assets to be distributed in fair proportions among these policy-holders.

As regards what the policy-holders should do in future, once the Insurance Bill is passed then everyone can rest assured that the premium rates in relation to benefits which insurance companies charge are both fair to those taking out policies and sound from the point of view of the insurance company itself. I do not think it is necessary to set up a Committee to advise policy-holders because, in this instance, I think many if not most of them have had their fingers burnt.

Mr Rajah: Sir, could the Minister assure the House whether, in view of the fact that people of doubtful character are operating these insurance companies, he would take adequate steps under the existing laws to see that no more of these companies or agents from the Federation come to Singapore to operate in future as they have done previously?

Dr Goh Keng Swee: I have already said in my answer that we shall past laws similar to those now obtaining in the Federation and which the Federation will soon pass. This will provide effective control on such companies.